Encompass Health (EHC)

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Encompass Health (EHC) - 2024 Q1 - Quarterly Report
2024-05-01 22:01
PART I [Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Q1 2024, detailing financial performance including a **13.4% increase in net operating revenues** and a **28.3% increase in net income** attributable to Encompass Health - Encompass Health is a provider of inpatient rehabilitation services, operating **160 inpatient rehabilitation hospitals** across 37 states and Puerto Rico as of March 31, 2024[30](index=30&type=chunk) Condensed Consolidated Statements of Comprehensive Income (Q1 2024 vs Q1 2023) | Metric | Three Months Ended March 31, 2024 (In Millions) | Three Months Ended March 31, 2023 (In Millions) | | :--- | :--- | :--- | | Net operating revenues | $1,316.0 | $1,160.4 | | Income from continuing operations | $140.1 | $114.3 | | Net income attributable to Encompass Health | $112.5 | $87.7 | | Diluted EPS (Continuing operations) | $1.11 | $0.88 | Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2024 (In Millions) | December 31, 2023 (In Millions) | | :--- | :--- | :--- | | Total current assets | $929.8 | $841.8 | | Total assets | $6,231.4 | $6,102.4 | | Total current liabilities | $680.3 | $656.4 | | Total liabilities | $3,828.0 | $3,805.2 | | Total shareholders' equity | $2,362.3 | $2,255.2 | Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2024 (In Millions) | Three Months Ended March 31, 2023 (In Millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $238.8 | $227.9 | | Net cash used in investing activities | $(129.7) | $(104.0) | | Net cash used in financing activities | $(40.6) | $(58.0) | Net Operating Revenues by Payor Source (Q1 2024 vs Q1 2023) | Payor Source | 2024 (In Millions) | 2023 (In Millions) | | :--- | :--- | :--- | | Medicare | $854.1 | $757.7 | | Medicare Advantage | $223.8 | $186.2 | | Managed care | $142.8 | $127.1 | | Total | $1,316.0 | $1,160.4 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2024 financial results, highlighting **13.4% revenue growth** driven by volume, while addressing regulatory challenges and maintaining strong liquidity for operations and capital returns [Executive Overview](index=19&type=section&id=Executive%20Overview) The company reported a **13.4% increase in net operating revenues** for Q1 2024, driven by volume growth and ongoing capacity expansion through new bed additions and hospital developments - Net operating revenues increased **13.4%** in Q1 2024 compared to Q1 2023, driven by volume growth[65](index=65&type=chunk) - In 2024, the company continued its capacity expansion by adding **51 new beds** to existing hospitals[66](index=66&type=chunk) New Hospital Development Pipeline | Location | Expected Opening Year | Number of New Beds | | :--- | :--- | :--- | | Kissimmee, FL | 2024 | 50 | | Atlanta, GA (JV) | 2024 | 40 | | Johnston, RI | 2024 | 50 | | Daytona Beach, FL | 2025 | 50 | | Fort Myers, FL (JV) | 2025 | 60 | | Palm Beach Gardens, FL | 2026 | 50 | | Amarillo, TX | 2026 | 50 | [Business Outlook and Key Challenges](index=20&type=section&id=Business%20Outlook%20and%20Key%20Challenges) The company anticipates long-term demand growth from an aging population but faces challenges from healthcare regulations, including the CMS 2025 Proposed Rule and the expanding Review Choice Demonstration program, alongside competitive and labor market pressures - Long-term demand is expected to grow as the number of Medicare enrollees is projected to increase by approximately **3% annually**[69](index=69&type=chunk) - The CMS 2025 Proposed Rule for IRFs is expected to result in a net increase to the company's Medicare payment rates of approximately **3.0%**, effective October 1, 2024[74](index=74&type=chunk) - The CMS Review Choice Demonstration (RCD) is expanding to states where the company has a significant presence, including Pennsylvania, Texas, and California, which will require additional claim review processes[75](index=75&type=chunk) - Key operational challenges include maintaining strong patient volume growth against competition and recruiting and retaining high-quality personnel amid industry-wide staffing shortages[78](index=78&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q1 2024 net operating revenues increased **13.4% to $1.316 billion**, driven by higher patient discharges and revenue per discharge, leading to a **28.3% increase in net income** despite an impairment charge Key Operational Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Discharges | 61,111 | 55,557 | 10.0% | | Net patient revenue per discharge | $20,990 | $20,415 | 2.8% | | Occupancy % | 76.7% | 73.4% | 4.5% | | Employees per occupied bed | 3.34 | 3.32 | 0.6% | - Revenue growth was driven by increased volumes, with same-store discharges increasing **6.7%** and new hospitals contributing to the remainder of the growth[85](index=85&type=chunk) - Other operating expenses increased due to higher provider taxes and a one-time impairment charge of **$10.4 million** related to the closure of a joint venture hospital in Eau Claire, Wisconsin[88](index=88&type=chunk) - Salaries and benefits as a percentage of revenue slightly decreased from **54.2% to 54.1%**, primarily due to lower contract labor usage and reduced sign-on/shift bonuses[82](index=82&type=chunk)[87](index=87&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$134.4 million in cash** and **$964 million available under its revolving credit facility**, supporting planned **$580-$610 million capital expenditures** and continued shareholder returns through dividends and repurchases - As of March 31, 2024, the company had **$134.4 million in cash and cash equivalents** and approximately **$964 million available** under its revolving credit facility[101](index=101&type=chunk)[102](index=102&type=chunk) Cash Flow Summary (Q1 2024 vs Q1 2023) | Activity | Q1 2024 (In Millions) | Q1 2023 (In Millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $238.8 | $227.9 | | Net cash used in investing activities | $(129.7) | $(104.0) | | Net cash used in financing activities | $(40.6) | $(58.0) | - The company expects to spend approximately **$580 million to $610 million** on capital expenditures in 2024[110](index=110&type=chunk) - The company declared a cash dividend of **$0.15 per share** and has approximately **$198 million remaining** under its stock repurchase authorization as of March 31, 2024[111](index=111&type=chunk)[113](index=113&type=chunk) [Adjusted EBITDA](index=29&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA, a key non-GAAP liquidity measure for credit agreement covenants, increased significantly to **$273.0 million in Q1 2024** from **$229.0 million in Q1 2023**, with detailed reconciliations provided Reconciliation of Net Income to Adjusted EBITDA | Metric | Three Months Ended March 31, 2024 (In Millions) | Three Months Ended March 31, 2023 (In Millions) | | :--- | :--- | :--- | | Net income | $138.8 | $113.3 | | Provision for income tax expense | $38.3 | $31.9 | | Interest expense and amortization | $35.2 | $36.4 | | Depreciation and amortization | $70.3 | $63.9 | | **Adjusted EBITDA** | **$273.0** | **$229.0** | - Adjusted EBITDA is a critical liquidity measure used to assess compliance with material covenants in the company's credit agreement, such as the leverage ratio and interest coverage ratio[118](index=118&type=chunk)[119](index=119&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2024[130](index=130&type=chunk) - There were no material changes to the company's Internal Control over Financial Reporting during the first quarter of 2024[131](index=131&type=chunk) PART II [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal actions, governmental audits, and potential undisclosed *qui tam* lawsuits under the False Claims Act, common in the highly regulated healthcare industry - In the ordinary course of business, the company is subject to regulatory audits, investigations, and various legal actions, including employment and personal injury claims[134](index=134&type=chunk) - The company acknowledges the possibility of undisclosed *qui tam* lawsuits filed against it under the False Claims Act, which allows private citizens to sue on behalf of the government[135](index=135&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the 2023 Annual Report on Form 10-K are reported, with relevant updates incorporated by reference from the 'Key Challenges' section of the MD&A - There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023[137](index=137&type=chunk) - The report incorporates by reference the discussion in the "Executive Overview—Key Challenges" section of the MD&A for updates to risk factors[137](index=137&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2024, the company repurchased **176,390 shares** at an average price of **$69.86**, primarily for tax liabilities on vested stock awards, with **$198 million** remaining under the repurchase authorization Purchases of Equity Securities (Q1 2024) | Period | Total Number of Shares Purchased | Average Price Paid per Share ($) | | :--- | :--- | :--- | | January 2024 | 111,761 | $66.77 | | February 2024 | 64,410 | $75.17 | | March 2024 | 219 | $82.58 | | **Total** | **176,390** | **$69.86** | - As of March 31, 2024, approximately **$198 million** remained under the company's common stock repurchase authorization, which was reset to **$250 million** in July 2018[140](index=140&type=chunk) [Other Information](index=33&type=section&id=Item%205.%20Other%20Information) No new or modified insider trading arrangements under Item 408(a) of Regulation S-K were reported during the quarter - The company reported no insider trading arrangements for the period[141](index=141&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index, listing all documents filed as part of the quarterly report, including CEO/CFO certifications and XBRL data files - Refers to the Exhibit Index for a list of all exhibits filed with the Form 10-Q[142](index=142&type=chunk)
Encompass Health opens request for grant applications
Prnewswire· 2024-05-01 20:29
The Company will award research funding grants totaling up to $50,000. BIRMINGHAM, Ala., May 1, 2024 /PRNewswire/ -- On May 1, Encompass Health opened its call for research grant applications due Sept. 30 at 5 p.m. CST. The grants, totaling up to $50,000, will be awarded for the investigation of the impact or effectiveness of therapies in the inpatient rehabilitation facility post-acute care setting, knowledge translation or implementation science. Grant recipients do not have to be affiliated with Encompas ...
EHC or CHE: Which Is the Better Value Stock Right Now?
Zacks Investment Research· 2024-05-01 16:41
Investors looking for stocks in the Medical - Outpatient and Home Healthcare sector might want to consider either Encompass Health (EHC) or Chemed (CHE) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The proven Zacks R ...
Encompass Health (EHC) Stock Down Despite Q1 Earnings Beat
Zacks Investment Research· 2024-04-29 17:10
Encompass Health Corporation (EHC) shares lost 0.4% since it reported first-quarter 2024 results on Apr 24. Although it beat estimates thanks to rising patient revenue, strong discharges and a robust pipeline for bed additions. Investors might be concerned regarding elevated operating expenses despite cost control measures undertaken by the company.EHC reported first-quarter 2024 adjusted earnings per share (EPS) of $1.12, which outpaced the Zacks Consensus Estimate by 20.4%. The bottom line rose 27.3% year ...
Why Encompass Health (EHC) is a Top Momentum Stock for the Long-Term
Zacks Investment Research· 2024-04-26 14:55
For new and old investors, taking full advantage of the stock market and investing with confidence are common goals. Zacks Premium provides lots of different ways to do both.The research service features daily updates of the Zacks Rank and Zacks Industry Rank, full access to the Zacks #1 Rank List, Equity Research reports, and Premium stock screens, all of which will help you become a smarter, more confident investor.It also includes access to the Zacks Style Scores.What are the Zacks Style Scores?Developed ...
Encompass Health Corporation (EHC) Hit a 52 Week High, Can the Run Continue?
Zacks Investment Research· 2024-04-26 14:16
Have you been paying attention to shares of Encompass Health (EHC) ? Shares have been on the move with the stock up 0.2% over the past month. The stock hit a new 52-week high of $85.84 in the previous session. Encompass Health has gained 24% since the start of the year compared to the 0.8% move for the Zacks Medical sector and the 2.6% return for the Zacks Medical - Outpatient and Home Healthcare industry.What's Driving the Outperformance?The stock has a great record of positive earnings surprises, as it ha ...
Encompass Health (EHC) - 2024 Q1 - Earnings Call Transcript
2024-04-25 18:09
Encompass Health Corporation (NYSE:EHC) Q1 2024 Results Conference Call April 25, 2024 10:00 AM ET Company Participants Mark Miller - Senior Vice President of Investor Relations & Strategic Planning Mark Tarr - CEO, President & Director Douglas Coltharp - Executive VP & CFO Conference Call Participants Kevin Fischbeck - Bank of America A.J. Rice - UBS Andrew Mok - Barclays Ann Hynes - Mizuho Securities Scott Fidel - Stephens John Ransom - Raymond James Pito Chickering - Deutsche Bank Ben Hendrix - RBC Capit ...
Here's What Key Metrics Tell Us About Encompass Health (EHC) Q1 Earnings
Zacks Investment Research· 2024-04-25 00:01
Encompass Health (EHC) reported $1.32 billion in revenue for the quarter ended March 2024, representing a year-over-year increase of 13.4%. EPS of $1.12 for the same period compares to $0.88 a year ago.The reported revenue compares to the Zacks Consensus Estimate of $1.27 billion, representing a surprise of +3.60%. The company delivered an EPS surprise of +20.43%, with the consensus EPS estimate being $0.93.While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- a ...
Encompass Health (EHC) - 2024 Q1 - Quarterly Results
2024-04-24 20:28
Exhibit 99.1 Media Contact April 24, 2024 Kennedi Spurling, 205 970-5912 kennedi.spurling@encompasshealth.com Investor Relations Contact Mark Miller, 205 970-5860 mark.miller@encompasshealth.com Encompass Health reports results for first quarter 2024 Increases full-year guidance BIRMINGHAM, Ala. - Encompass Health Corporation (NYSE: EHC), the largest owner and operator of inpatient rehabilitation hospitals in the United States, today reported its results of operations for the first quarter ended March 31, 2 ...
Insights Into Encompass Health (EHC) Q1: Wall Street Projections for Key Metrics
Zacks Investment Research· 2024-04-23 14:21
In its upcoming report, Encompass Health (EHC) is predicted by Wall Street analysts to post quarterly earnings of $0.93 per share, reflecting an increase of 5.7% compared to the same period last year. Revenues are forecasted to be $1.27 billion, representing a year-over-year increase of 9.5%.Over the last 30 days, there has been no revision in the consensus EPS estimate for the quarter. This signifies the covering analysts' collective reconsideration of their initial forecasts over the course of this timefr ...